System Dynamics Society

System Dynamics Society

So Paulo University System Dynamics Society 27th International Conference Renewable Energy: A Framework to Model a Brazilian Case of Success (Part I) Joaquim Rocha dos Santos (M.Eng.) EPUSP Marcelo Ramos Martins (PhD) EPUSP Abraham Sin Oih Yu (PhD) FEA-USP Paulo Tromboni Nascimento (PhD) FEA-USP Agenda Tell the story Graph the Variables Making the System Visible Subsystem Diagram

Causal Loops Diagrams Identify the lessons Tell the Story What is this? Tell the Story What is this? A flex-fuel engine with its flex-fuel electronic injection system Tell the Story What is this? WHY IS IT IMPORTANT?

A flex-fuel engine with its flex-fuel electronic injection system Tell the Story What is this? Petroleum Industry Sugar Cane Industry A flex-fuel engine with its flex-fuel electronic injection system Tell the Story Environment

Petroleum Industry Sugar Cane Industry Land Avaliability Food Industry Tell the Story Environment Sugar Cane Industry

Our Focus (Today) Land Avaliable Food Industry Petroleum Industry Tell the story 1970 1980 1990

2000 2010 Time Tell the story From 1950 to 1973 World oil demand increased steadily at a rate of 9.5%/year Petroleum Costs stable around 2.5 US dollars per barrel 1970 1980 1990

2000 2010 Time Tell the story First Oil Crisis (1973) The Organization of the Petroleum Exporting Countries (OPEC), established a new production level and costs policy Barrel price increased to 11.65 US dollars. 1970 1980 1990

2000 2010 Time Tell the story First Oil Crisis (1973) The Organization of the Petroleum Exporting Countries (OPEC), established a new production level and costs policy Barrel price increased to 11.65 US dollars. 1970 1980 1990

2000 2010 Time Tell the story First Oil Crisis (1973) The Organization of the Petroleum Exporting Countries (OPEC), established a new production level and costs policy Barrel price increased to 11.65 US dollars. 1970 1980 1990

2000 2010 Time Tell the story Effects of First Oil Crisis (1973) Relative short term demand inelasticity Many countries faced a serious economic situation Decreased discretionary oil consumption, reducing its relative importance in their energy matrix Changes in macroeconomic policies, both fiscal and monetary 1970 1980

1990 2000 2010 Time Tell the story Effects of First Oil Crisis (1973) Brazil Systematic use of sugarcane ethanol as an alternative fuel started in 1934. From 1934 to 1975 anhydrous ethanol was added to petrol. In 1975, Brazil started its Alcohol Program, so called Proalcool. At the beginning, the aim of the program was a modest replacement of petrol with anhydrous ethanol. In 1980 the goal became more ambitious. This new policy achieved a relevant percentage of petrol replacement: from 1% in

1990 1970 1971 to 41% 1980in 1985. (Leite, 2000 2010 Time 2007). Investment in Petrobras (Brazilian Petroleum Company) Tell the story Late 1970s Proalcool Program 1970 1980 1990

2000 2010 Time Tell the story Late 1970s Proalcool Program In country development of E-100 cars. In 1978, an agreement between the Brazilian Government and the National Association of Motor Vehicle Manufactures (Anfavea) established the beginning of E-100 development. In 1979 the E-100 was in the streets. 1970 1980

1990 2000 2010 Time Tell the story Late 1970s Proalcool Program 1970 1980 1990 2000

2010 Time Tell the story 1985 1990 Economic Crisis 1970 1980 1990 2000 2010

Time Tell the story 1970 1980 1985 1990 Economic Crisis Political changes Economic pressures: High inflation Low GDP for more than fifteen years. Cut of subsidies The total ethanol fractional usage reduced from 50% (1988) to 40% (1994). During the 1980s 70%

of vehicles sold in Brazil 1990 2000 2010 Time where E-100. The ethanol fleet was relevant and it would take a decade to be deactivated. Tell the story 1970 1980 1985 1990 Economic Crisis Political changes Economic pressures:

High inflation Low GDP for more than fifteen years. Cut of subsidies The total ethanol fractional usage reduced from 50% (1988) to 40% (1994). During the 1980s 70% of vehicles sold in Brazil 1990 2000 2010 Time where E-100. The ethanol fleet was relevant and it would take a decade to be deactivated. Tell the story

1970 1980 1985 1990 Economic Crisis Political changes Economic pressures: High inflation Low GDP for more than fifteen years. Cut of subsidies The total ethanol fractional usage reduced from 50% (1988) to 40% (1994). During the 1980s 70% of vehicles sold in Brazil 1990 2000

2010 Time where E-100. The ethanol fleet was relevant and it would take a decade to be deactivated. Tell the story Early 1990s 1970 1980 1990 2000 2010

Time Tell the story Early 1990s 1970 1980 End of Proalcool Rise in international raw sugar cane prices SHORTAGE OF ETHANOL. 1990 2000

2010 Time Tell the story Early 1990s 1970 1980 End of Proalcool Rise in international raw sugar cane prices SHORTAGE OF ETHANOL.

1990 2000 2010 Lost of consumer confidence This would charge its price later. From 1986 to 2003, consumers no longer bought ethanol E-100 cars. The remainder ethanol cars still sold were results of the sugarcane sector pressure for government incentives and the so called green fleet, part of the Government cars fleets should be E-100. Time Tell the story Early 1990s

International Raw Sugar Cane Price 12.00 10.001970 1980 1990 2000 8.00 6.00 4.00 2.00 0.00 19601965197019751980198519901995200020052010 2010

Time Tell the story Early 1990s 1970 1980 1990 2000 2010 Time

Tell the story 2003 Flex Fuel Electronic Injection Technological Inovation 1970 1980 1990 2000 2010 Time Tell the story 2003 Flex Fuel Electronic Injection

1970 A technological innovation, the flex fuel electronic injection, was already available in the US. Bosch started to study this solution in 1988, in California, USA. Due to the technology adopted, Bosch solution was expensive 1990 1980 patterns costs Time for Brazilian and Brazilian 2000 motor vehicle 2010

manufactures refused to use it. Moreover, dual sensor technology was not suitable for Brazil due to the presence of hydrated ethanol. Tell the story 2003 Flex Fuel Electronic Injection A technological innovation, the flex fuel electronic injection, was already available in the US. Bosch started to study this solution in 1988, in California, USA. Due to the technology adopted, Bosch solution was expensive 1990 1970 1980 patterns costs

Time for Brazilian and Brazilian 2000 motor vehicle 2010 manufactures refused to use Magnetti Mareli launched theit.flex fuel electronic Moreover, dual sensor technology was not suitable for Brazil due injection system with only one sensor. to the presence of hydrated ethanol. Volkswagen do Brasil launches its first flex car in 2003 Graph the Variables

Cars sold in Brazil Making the System Visible Subsytem Diagram Making the System Visible Causal loop Diagram International Sugar Price Internationl Petroleum Prices Government Incentives + to National Petroleum Production +

B3 National Petroleum Production - Petroleum Imports + + B5 Petroleum Import Costs + + National Petroleum

Production - Government Incentives to Ethanol + Ethanol Supply + B2 Gasoline/Ethanol Car Price Ration

Gasoline Fuel Restriction B1 Gasoline Cars Restrictions Cars Demand Gasoline Adopters + + Ethanol Fuel Supply +

Gasoline/Ethanol Ethanol Cars Supply Fuel Price Ratio + Confidence on Ethanol + + Ethanol Attractiveness + R1 B4 Ethanol Adoption Shortage

+ Ethanol Adoption Rate Ethanol Adopters Shortage Factor + Ethanol Fuel Demand + Identify the Lessons This paper is 35 years late!!!

With this preliminary analysis, it is possible to understand the shift in loops dominance and why they happened Flex fuel technology became a dominant design and changed the consumer behavior Pro-alcohol program is now self sufficient and its long term effects must be studied in advance. Next Step Build a simulation model to explore some scenarios Expand the model so as to include other relevant issues (land, food and environmental aspects) Thank you very much! Questions ...?

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